Hindenburg Research, a short-seller, has released yet another report alleging that Block Inc has willingly facilitated fraud against consumers and governments.
Entrepreneur Jack Dorsey founded Block Inc and it offers payment and mobile banking services for merchants and consumers. The company, formed in 2009 and was known as Square, came up with a disruptive idea. It used a tiny card reader that could plug into a smartphone’s headphone jack to easily enable artists and vendors to take credit card payments.
Hindenburg, in its blog, said, “Our 2-year investigation has concluded that Block has systematically taken advantage of the demographics it claims to be helping. The “magic” behind Block’s business has not been disruptive innovation, but rather the company’s willingness to facilitate fraud against consumers and the government, avoid regulation, dress up predatory loans and fees as a revolutionary technology, and mislead investors with inflated metrics.”
The blog post further states that Block Inc wildly overstated its genuine user counts and understated its customer acquisition costs. Former employees estimated that 40 per cent to 75 per cent of accounts they reviewed were fake, involved in fraud, or were additional accounts tied to a single individual.
The report claims that Block thrived on the “unbanked” customers. However, the report adds on, that most of the “underbanked” customers were either criminals or people involved in illicit activities. “The company’s “Wild West” approach to compliance made it easy for bad actors to mass-create accounts for identity fraud and other scams, then extract stolen funds quickly”, the report said.
Also Read: IT Firm Accenture To Cut 19K Jobs